STAND. COM. REP. NO. 1064-00

                                 Honolulu, Hawaii
                                                   , 2000

                                 RE: S.B. No. 2945
                                     S.D. 1
                                     H.D. 2




Honorable Calvin K.Y. Say
Speaker, House of Representatives
Twentieth State Legislature
Regular Session of 2000
State of Hawaii

Sir:

     Your Committee on Consumer Protection and Commerce, to which
was referred S.B. No. 2945, S.D. 1, H.D. 1, entitled: 

     "A BILL FOR AN ACT RELATING TO TAXATION,"

begs leave to report as follows:

     The purpose of this measure is to:

     (1)  Impose the use tax on contracting imported for resale
          or use in Hawaii;

     (2)  Provide pyramiding relief from the general excise tax
          for the sale of amusements;

     (3)  Provide a lower public service company (PSC) tax rate
          on telecommunications services and transportation
          services that are resold;

     (4)  Make technical amendments to statutory provisions
          enacted under Acts 70 and 71, Session Laws of Hawaii
          1999;

     (5)  Clarify that the use of financial services imported or
          purchased by a financial institution is exempted from
          the use tax until June 30, 2004; and

     (6)  Require the Auditor to:


 
 
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          (a)  Conduct a study on whether debit card, credit
               card, merchant card draft, and trust
               administration services can be or are being
               performed in the State; and

          (b)  Submit a report of the findings and
               recommendations to the Legislature prior to the
               repeal of the provision relating to the use tax
               exemption for the use of financial services
               imported or purchased by a financial institution
               on June 30, 2004.

     Testimony in support of this measure was submitted by AT&T.

     Testimony in support of this measure, with proposed
amendments, was submitted by the Department of Taxation, Hawaii
Bankers Association, GTE Hawaiian Telephone, and a private
attorney that represented several freight forwarders.

     Testimony commenting on this measure was submitted by the
Tax Foundation of Hawaii.

     Upon consideration of this measure, your Committee has
amended this bill by replacing its contents with the substantive
provisions of H.B. No. 2604, H.D. 2, a similar bill that was
reported from your Committee on Finance earlier in this session.
The proposed PSC tax relief schedules for telecommunications
services and motor carriers, as stated in the testimony of the
Department of Taxation, have also been incorporated into this
measure.

     Specifically, your Committee has amended S.B. No. 2945, S.D.
1, H.D. 1, by deleting the following:

     (1)  Provision pertaining to a use tax exclusion for
          financial services imported by a financial institution
          for use in Hawaii; and 

     (2)  Section requiring a study by the Legislative Auditor.

     As affirmed by the record of votes of the members of your
Committee on Consumer Protection and Commerce that is attached to
this report, your Committee is in accord with the intent and
purpose of S.B. No. 2945, S.D. 1, H.D. 1, as amended herein, and
recommends that it be referred to the Committee on Finance, in
the form attached hereto as S.B. No. 2945, S.D. 1, H.D. 2.


 
 
                                 STAND. COM. REP. NO. 1064-00
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                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Consumer
                                   Protection and Commerce,



                                   ______________________________
                                   RON MENOR, Chair